AM Best downgrades LBL ratings

AM Best has downgraded the long-term issuer credit rating (Long-Term ICR) to “bbb” (Good) from “bbb+” (Good) and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Lincoln Benefit Life Company (LBL). In addition, AM Best has revised the outlook of these Credit Ratings (ratings) to negative from stable.

 In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Guaranty Income Life Insurance Company (GILIC) (headquartered in Baton Rouge, LA) and United Life Insurance Company (ULIC) (Cedar Rapids, IA), collectively referred to as Kuvare Retail Group, which bought LBL in 2019. Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Kuvare Life Re (Kuvare Re). The outlook of these ratings is stable.

The ratings of LBL reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The ratings of Kuvare Retail Group reflect its balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

Additionally, the ratings of Kuvare Re reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

AM Best said that the Long-Term ICR downgrade and negative outlooks of LBL’s ratings recognises the continued capital support required for its captive reinsurer, Lancaster Re Captive Insurance Company, and the resulting impacts that is expected to have on LBL’s capital flexibility moving forward. Deterioration in the company’s capital trends is due to underperformance in its runoff universal life with secondary guarantees (ULSG) business beyond initial projections. Mitigating factors include the expectation for profitability as the ULSG business approaches its peak reserve in the coming years.

It added that the ratings of Kuvare Retail Group recognise its solid operating improvements over the last several years, including premium growth in its key annuity products and stable operating profile with favourable operating returns. AM Best also notes the recent key initiatives that have improved capitalisation and leverage, including the launch of a sidecar. Additionally, Blue Owl Capital Inc. made a long-term investment in Kuvare Retail Group in 2024, purchasing $250 million of preferred equity. Going forward, AM Best expects the organisation to have a measured approach to growth within future risk-based capital limits.

Offsetting rating factors include the impact of new business strain on operating results and capital. Additionally, GILIC’s reserve book is heavily weighted in interest sensitive reserves with a concentrated product profile. AM Best also recognises the high use of reinsurance including external and affiliated entities.

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